JPMorgan Chase & Company, one of the largest banks in America, is facing hard times due to criminal speculations. The bank faces a U.S. criminal probe into foreign-exchange dealings and boosted its maximum estimate for “reasonably possible” losses on legal cases to the highest in more than a year.
The firm is cooperating with the criminal investigation conducted by the Department of Justice as well as inquiries by regulators in the U.K. JPMorgan may need as much as $6 billion to cover losses beyond reserves for legal matters, which is up from $1.3 billion from the end of June.
CEO Jamie Dimon has led the New York-based firm through $23 billion in settlements last year.
He is contending with an international inquiry into whether traders at the biggest banks sought to profit by rigging currency rates. Citigroup, as well as USB, are also facing criminal inquiries by the Justice Department into their foreign-exchange dealings. Citigroup cut third-quarter results to include a $600- illion legal charge.
“These investigations are focused on the firm’s spot FX trading activities as well as controls applicable to those activities,”
JPMorgan stated in its report. While the company is in talks to resolve the cases, “there is no assurance that such discussions will result in settlements,” according to the report.
JPMorgan slid 1.7 percent to $59.87 per share, which is the most in more than two weeks and the worst performance in the KBW Bank Index. The shares have gained 2.5 percent this year, compared with the 3.9 percent advance of the 24 company index. Banks are facing foreign exchange probes by authorities on three continents.
Richard Usher, JPMorgan’s chief currency dealer in London, left the company amid efforts to settle a U.K. probe into allegations of foreign-exchange rigging, people with knowledge of the moves said in October. However, he has not been accused of any wrongdoing.
JPMorgan booked $1.01 billion in legal expenses during the third quarter, tied “in large part” to the currency probes, Chief Financial Officer Marianne Lake said Oct. 14. Cases could cost banks as much as $41 billion combined to settle.
U.S. firms began disclosing estimates for possible legal losses after the U.S. Securities and Exchange Commission told finance chiefs in 2010 they should provide investor guidance “when there is at least a reasonable possibility” costs will be incurred, even if the risk is too low to require reserves.
JPMorgan said its estimated range, spanning from no cost to as much as $5.9 billion as of Sept. 30, “involves significant judgment, given the varying stages of the proceedings.”
It already has set aside money to cover several hundred legal proceedings, and it may boost those accruals further if additional expenses become probable.